GST in Budget 2026: Essential Legislative Changes Tax Consultants and Business Owners Must Understand

The Budget 2026 brings significant updates to the Goods and Services Tax (GST) framework that will impact businesses and tax consultants alike. These changes aim to simplify compliance, address long-standing issues, and promote smoother trade operations. Understanding these legislative amendments is crucial for businesses to adapt their accounting practices and optimize tax benefits.

This post covers the top five GST changes introduced in Budget 2026, explaining their practical implications and offering examples to help you navigate the new rules confidently.

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Post-Sale Discounts No Longer Require Pre-Existing Agreements

One of the most welcomed changes is the amendment to Section 15(3)(b) of the CGST Act concerning post-sale discounts. Previously, businesses had to have a written agreement or contract in place before the sale to claim GST benefits on discounts offered after the sale. This requirement often created compliance challenges and delayed tax credits.

Now, businesses can claim GST benefits on post-sale discounts without needing a pre-existing agreement. This means:

• Discounts given after the invoice date can reduce the taxable value for GST purposes.

• The discount must be linked to the original supply of goods or services.

• Proper documentation of the discount is still necessary for audit trails.

  
  

Example: A retailer sells electronics and offers a 5% discount after the sale due to a promotional campaign. Under the new rule, the retailer can adjust the GST payable without having had a prior written agreement about the discount.

This change reduces administrative burdens and aligns GST treatment with commercial realities, benefiting both sellers and buyers.

Provisional Refunds Allowed for Inverted Duty Structure Cases

The Budget introduces a new Section 54(6) that allows businesses to claim provisional refunds when facing an inverted duty structure. An inverted duty structure occurs when the GST rate on inputs is higher than the GST rate on outputs, causing a tax credit accumulation.

Previously, refund claims under this scenario were often delayed, affecting cash flow for manufacturers and traders.

Key points of the update:

• Businesses can now apply for provisional refunds while the final claim is processed.

• This helps ease working capital constraints caused by blocked input tax credits.

• The provisional refund amount is subject to verification and adjustment later.

  
  

Example: A manufacturer pays 18% GST on raw materials but sells finished goods taxed at 5%. The manufacturer can now get a provisional refund on the excess input tax credit, improving liquidity.

This amendment supports industries with complex supply chains and varying tax rates, encouraging smoother operations.

Export Procedures Simplified by Removing Value Caps and Thresholds

Exporters will benefit from two important changes aimed at easing export-related GST compliance:

• The ₹10 lakh value cap on courier exports has been removed. Earlier, courier exports above this value faced additional restrictions.

• The minimum threshold for claiming export refunds has been eliminated, allowing exporters of any value to claim GST refunds.

  
  

These changes mean:

• Small and medium exporters can claim refunds without worrying about minimum export values.

• Exporters using courier services can process shipments of any value without GST restrictions.

• Faster and more inclusive refund processing will improve export competitiveness.

  
  

Example: A small handicraft exporter shipping goods worth ₹5 lakh via courier can now claim GST refunds without facing previous caps or thresholds.

This update encourages more businesses to participate in exports and reduces procedural hurdles.

Tobacco Taxation Overhauled with Removal of Compensation Cess

A major shift in tobacco taxation takes effect from February 1, 2026. The Compensation Cess on tobacco products will be removed and replaced with revised excise and GST rates.

What this means:

• The Compensation Cess, which was an additional tax to compensate states for GST revenue loss, will no longer apply to tobacco.

• Tobacco products will be taxed under updated excise and GST slabs designed to maintain revenue neutrality.

• Businesses dealing with tobacco must update their tax calculations and invoicing systems accordingly.

  
  

Example: A cigarette manufacturer will no longer add Compensation Cess separately but will apply the new excise and GST rates as per the revised schedule.

This change simplifies the tax structure on tobacco but requires careful attention to new rates to ensure compliance.

Place of Supply Rules Updated to Clarify Intermediary Services

Section 13 of the IGST Act has been amended to clarify the place of supply rules for intermediary services. This update aims to reduce disputes related to export classification and tax jurisdiction.

Key clarifications include:

• The place of supply for intermediary services will be the location of the supplier, not the recipient.

• This reduces ambiguity in cross-border transactions involving intermediaries such as agents or brokers.

• It helps determine whether the supply qualifies as export of services and the applicable GST treatment.

  
  

Example: An Indian agent arranging services for a foreign client will have the place of supply as India, simplifying tax filings and export claims.

This amendment provides clearer guidelines, reducing litigation risks and easing compliance for service providers.

What Businesses Should Do Next

• Review contracts and discount policies to align with the new post-sale discount rules.

• Assess input-output tax rate mismatches and prepare refund applications under the provisional refund scheme.

• Update export documentation and refund claims to leverage the removal of value caps and thresholds.

• Adjust tobacco product pricing and tax calculations according to the revised excise and GST rates.

• Train finance and compliance teams on the new place of supply rules for intermediary services.

  
  

Staying informed and proactive will help businesses avoid penalties and optimize their GST benefits under the new Budget 2026 framework.